Friday, February 08, 2013

Using the F word


Dr Aghi mentioned the F word yesterday and today Japan's Aso may or may not have used the F word depending on which news feed, associated translation and following MoF damage control story you would like to believe. But for overall effect Dr Aghi's use was as effective as an F word in a Beckett play, achieving maximum effect with Euro falling,  whereas Aso's usage ended up with him being dragged into compliance and given a roasting for damaging the reputation of the "corporate mission statement" as the JPY rallied.  The F word of course referring to FX.  So if you don't want to be a complete Aso, leave the F word to the experts.

Are we back to watching internecine squabbles within the Euro group over where Euro should be? Predictably Germany's opener with GERMAN GOV'T SPOKESMAN SAYS GERMANY BELIEVES EURO IS NOT OVERVALUED smacks of the old game of corporate squeeze knowing that German corporates are in a stronger position re Euro moves than marginal exporters in France and the periphery. Noise perhaps but with the Macro world quiet it may be a distraction to fill time.

The theme of potential tops, or at least corrective rollovers still intrigues TMM. Having cut our equities at the end of January we have been watching them trace out what almost looks like a square wave form on last week's tic charts with little confirmation either way. FX moves also appear to have flattened off as momentum in Euro and jpy recent moves start to reflect the rangy to soft nature of commodity currencies. We were staring at technicals yesterday and having seen EUR/GBP bust through its recent up trend, noted a USD/JPY doji 2 days ago following a soothsayer signal and a myriad of signals in EUR/USD too.

And the mood? Well the tone of commentaries hitting our inboxes are still massively skewed to "buy the dip". There seems to be little or no appetite (or expectation) for Euro to fall further from here and little belief that the Jpy could possibly rally much further. This leaves TMM, in their normally stroppy bolshie counter consensus way feeling the weak side is the down side in EUR/JPY. So whilst equities decide what they are going to do TMM will continue to punt in FX and the lack of much bounce in EUR/USD, has spurred us to add short Eur/Jpy to our short EUR/GBP from yesterday.

Finally, the comments coming out yesterday from FOMC's Evans reminded us of a very strange twist that supports the theory of Yin and Yang.  Every good has an equal bad to counter it. It appears that Evans, who TMM much admire, has a twin living in the UK who is as evil as Evans is good.  Can YOU spot the difference between Evans and Ed Balls?







The top picture is of Charles L. Evans, Alternate FOMC member, Chicago
The bottom picture is of Ed Balls, UK labour MP and shadow chancellor.

21 comments:

amplitudeinthehouse said...

> Yin and Yang <

Pol, soon as you conceptualize it, you lose it!

Now, back to books..

livia said...

evans is a moron of galatical proportions. all the eccles denizens are addled with "post hoc ergo propeter hoc"

Corey said...

I thought the f word was fundamentals.

Saul Bollox said...

Balls.

Anonymous said...

A bit of a lost week. US is strong relative to the rest of the world as is always the case before a decent move down. Agriculture is looking very interesting. I wonder if some day in the near future China would start trading soybeans with Brazil in CNY. Nick

Anonymous said...

always = recently. Nick

Anonymous said...

C Says
Time to let the 'stuff' out of the portfolio this morning.Very empty in there and given cash seems to have a terrible reputation I must be getting poorer as the hours pass.yet on balance the $ looks like it may be ready to reset and if it does then the 'stuff' will give back the gains YTD,or most of them. Think I will go with the Chinese and have a temporary party.

Phallus Majorus said...

Polemic for Pope?

Leftback said...

Treasury markets are ripe for a little squeeze:

Shorts on Treasurys Double

Everyone is now positioned for the breakout move to a sustained level above 2%. We'll get it, of course - but perhaps not here.

Anonymous said...

This is too good to be missed:

Gordon Chang appeared on CNBC on Friday, noting the troubling difference between exports reported by China to other countries and imports reported by other countries from China, as well as the inconsistency between low cargo numbers and high reported export numbers. In response, the CNBC anchor said – and I am not making this up – “You know Gordon, I agree with you, but let me take a different tack on this, alright? Let’s say you believe that China is making up the numbers. But if the stock market there keeps going up because of it, and you believe the government will keep priming the numbers, isn’t that sort of a reason to bet on the Chinese stock market?”

Eddie

amplitudeinthehouse said...

-- Here again...some thoughts...watching this market from the sidelines is similar to watching an Iranian 80's movie where it's interspersed with playbacks in time to reality...

Every Qe cycle is unique is it not, so far in Qe 3 we're had the initial burst out the barriers... taking a step back into reality and delving into previous Qe cycles to this one one should compare the following variables

-Macro Data-
-Valuations
-Sentiment
-Credit
-CB
-FX

The currency market is key this time around.

- Some folks may feel that I'm over-reaching within the Qe matrix....yes ,there's two sides to a coin, but we think while Qe is abound it's a two sided one sided coin....and this movie could go on and on and on..we really don't care anymore, we do appreciate the informative prose each time we read inbetween the lines of market reports, newspaper columns and magazine articles , but sitting here watching another Qe cycle is the equivalent of being that one actor that through space-time knows the reality of events that produced the cause-effect that leads to the switch to reality once again....and there you have it...the market just keeps looping back till it doesn't give fuck anymore!...I think I'm there.

abee crombie said...

U.S. Investors: Meet Your New Central Banker … China!
-The Influence Of China’s Economy On U.S. Inflation Trends At Historical Highs
-China PMI Highest In 24 Months … Set To Hit U.S. Inflation In Coming Quarters
-Rise In U.S. CPI To Weigh On Consumer Confidence, Housing Recovery, Etc.

Leftback said...

FX is always critical.

AUDUSD clearly bearish. EURUSD decidedly dodgy. EURJPY rolling over finally? It's only a matter of time before equities catch up to reality.

Leftback said...

Markets have been known to pivot around:

1) Long bond auction Thursdays
2) Monthly options expiration
3) US 3-day holiday weekends

All three ahead of us here. Caution...

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Leftback said...

We are definitely thinking counter-trend move in bonds today. If nothing else operates, the old pre-long 3-day holiday weekend safety trade has been on my mind. Complacency is rife, but......

Not sure if anyone is listening but the FOMC is sending a message, Bullard and Pianalto both have made statements that QE(infinity) could end before December, but so far Mr Market isn't listening, probably has the volume up on his iPod. Right now he is probably focused on "earnings, fundamentals and the Improving Economy". But the fact is, this is a liquidity-driven market.

We all know the adage "Don't Fight The Fed", but if you think about the Fed's current role as the world's largest hedge fund and think about what is on its book, The Bernank is long Treasuries and MBS. The Fed is not long LNKD and FB. So the rotation from bonds to equities was a good thing for confidence in the short term but in the medium term this isn't really in the interests of the Fed, and a large yield spike would be quite uncomfortable. We are seeing a liquidity-driven mini-bubble in equities and I think the Fed will move to burst this before it gets very much larger. Look for more Fed speak in the days and weeks ahead.

Leftback said...

Just to amplify my point, MBS are now at a 12-month low after the move up in rates. AGG at levels not seen since last April. LB suggests the credit market is not going to continue to move in this direction indefinitely, given the present state of the Fed balance sheet.

MBS At 12 Month Lows

AGG at April 2012 Levels

Might be time for some of the more conservative investors to take another look at fixed income? The longer the equity market grinds sideways at these nose bleed valuations, the more attractive the yield on bonds begins to look.

Leftback said...

The "Great Rotation" may be running out of steam for now, and according to the blogosphere, there may be few people left to sell bonds:

No Living Investor Now Admits to being Long Bonds*

Awareness of the Fed's concern about blowing asset bubbles has begun to percolate:

Fed on a Hot Tin Roof

* Actually we are betting PIMCO has some, and what's more we do too.

Leftback said...

WMT announcement in detail:

"The Sixpack Family of Anytown, USA have just announced that they are a bit short of readies at the moment b/c they charged Christmas on the plastic and also they borrowed from Grammy and that nice Mr Rizzo who owns the pool hall and check cashing business by the station. Anyway they are currently paying it off so that Joe doesn't get his legs broken.

Family wages and transfer payments are flat, taxes and gasoline are up, so they aren't buying much plastic stuff from China right now and are staying home instead to watch American Idol and Un-Likeing Mr Rizzo's nephew on FB".

Anyway none of this should be of any concern to 15 y-o momo traders who are long FB and LNKD on margin in their parents basement in Parsippany.

amplitudeinthehouse said...

:)

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